A taxpayer may use the method provided in subsection (b) (whether or not such method has been prescribed under section 471) in inventorying goods specified in an application to use such method filed at such time and in such manner as the Secretary may prescribe. The change to, and the use of, such method shall be in accordance with such regulations as the Secretary may prescribe as necessary in order that the use of such method may clearly reflect income.
In inventorying goods specified in the application described in subsection (a), the taxpayer shall:
Subsection (a) shall apply only if the taxpayer establishes to the satisfaction of the Secretary that the taxpayer has used no procedure other than that specified in paragraphs (1) and (3) of subsection (b) in inventorying such goods to ascertain the income, profit, or loss of the first taxable year for which the method described in subsection (b) is to be used, for the purpose of a report or statement covering such taxable year-
The beginning inventory for the first taxable year for which the method described in subsection (b) is used shall be valued at cost. Any change in the inventory amount resulting from the application of the preceding sentence shall be taken into account ratably in each of the 3 taxable years beginning with the first taxable year for which the method described in subsection (b) is first used.
If a taxpayer, having complied with subsection (a), uses the method described in subsection (b) for any taxable year, then such method shall be used in all subsequent taxable years unless-
If paragraph (1) or (2) of this subsection applies, the change to, and the use of, the different method shall be in accordance with such regulations as the Secretary may prescribe as necessary in order that the use of such method may clearly reflect income.
The Secretary shall prescribe regulations permitting the use of suitable published governmental indexes in such manner and circumstances as determined by the Secretary for purposes of the method described in subsection (b).
Except as otherwise provided in regulations, all members of the same group of financially related corporations shall be treated as 1 taxpayer for purposes of subsections (c) and (e)(2).
For purposes of paragraph (1), the term "group of financially related corporations" means-
26 U.S.C. § 472
EDITORIAL NOTES
AMENDMENTS1984-Subsec. (g). Pub. L. 98-369 added subsec. (g).1981-Subsec. (d). Pub. L. 97-34, §236(a), substituted "3-year averaging for increases in inventory value" for "Preceding closing inventory" in heading, substituted first sentence reading "The beginning inventory for the first taxable year for which the method described in subsection (b) is used shall be valued at cost." for "In determining income for the taxable year preceding the taxable year for which the method described in subsection (b) is first used, the closing inventory of such preceding year of the goods specified in the application referred to in subsection (a) shall be at cost." and inserted "Any change in the inventory amount resulting from the application of the preceding sentence shall be taken into account ratably in each of the 3 taxable years beginning with the first taxable year for which the method described in subsection (b) is first used."Subsec. (f). Pub. L. 97-34, §235, added subsec. (f).1976-Subsecs. (a), (c), (e). Pub. L. 94-455, §1906(b)(13)(A), struck out "or his delegate" after "Secretary" wherever appearing.Subsec. (f). Pub. L. 94-455, §1901(b)(36)(A), struck out subsec. (f) which provided for a cross reference relating to involuntary liquidation and replacement of LIFO inventories.
STATUTORY NOTES AND RELATED SUBSIDIARIES
EFFECTIVE DATE OF 1984 AMENDMENT Pub. L. 98-369, div. A, title I, §95(b), July 18, 1984, 98 Stat. 616, provided that: "The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [July 18, 1984]."
EFFECTIVE DATE OF 1981 AMENDMENT Pub. L. 97-34, title II, §236(b), Aug. 13, 1981, 95 Stat. 252, provided that: "The amendment made by subsection (a) [amending this section] shall apply to taxable years beginning after December 31, 1981."
EFFECTIVE DATE OF 1976 AMENDMENT Amendment by section 1901(b)(36)(A) of Pub. L. 94-455 effective for taxable years beginning after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as a note under section 2 of this title.
- Secretary
- The term "Secretary" means the Secretary of the Treasury or his delegate.
- taxable year
- The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. "Taxable year" means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.
- taxpayer
- The term "taxpayer" means any person subject to any internal revenue tax.